If you’re a mobile marketer, chances are you’ve seen at some point in the past year the phrase “LTV > CPI” (that’s Life Time Value and Cost Per Install, just to make sure we’re all up to speed). A mathematical formulation that has proven ubiquitous enough to have an entire event series named after it, it has become something of a mantra for the industry.

But what does LTV is greater than CPI actually mean for app developers?

The answer is quite simple.

LTV allows you to spend more on advertising and do so more intelligently than someone who simply looks at a CPI cost. Sophisticated, sustainable and, in the long run, more affordable, an LTV-focused marketing team can ensure a greater chance for ROI in the long term.

The heyday of CPI

Before we look at why LTV is now considered king in the app marketing metrics stake, it’s worth examining the rise of CPI to quickly see its strengths and limitations. Because, despite the fact it has perhaps had its day in the sun, it remains an important metric in the app economy for a number of reasons.

First, it was simple to set up tracking for. Even with analytics and attribution in its early days, it was relatively easy for two developers to engage in server-to-server matching or using a tracking link to run campaigns.

Second, it offered greater security for advertisers than CPC (cost per click) and CPM (cost per mille) advertising, as it ensured that payment was only forthcoming when a user installed after interacting with an ad.

And third, and most importantly, the prevailing winds of the app economy at the time allowed CPI to become central to a low cost, volume-driven promotional approach. With the charts the dominant way of discovering a game, low-cost CPI installs were really useful for a time.

But slowly and steadily, that numbers game changed and it was largely because the app and mobile gaming economy forced it to. By the middle of 2013, expensive volume-driven games were made increasingly difficult to play for a number of reasons.

LTV’s Sustainability

The unsustainable CPI market explains why the ground has been so fertile for LTV to become the dominant metric in mobile marketing. Taking inspiration from a number of game monetization experts such as Eric Seufert and the vast improvement in app analytics and tracking, game developers have been emboldened to take a quality- and sustainability-first approach to app installs.

But why does LTV create this approach to mobile games marketing efforts? The reason is that it acts as something of a forecast for how much a user will be worth in the future, not just a reflection of what they’re worth now. That means when you calculate it, you’ll see you have more room to market than you might think.

To explain this, it’s worth taking a look at the most basic formulation of the LTV equation, which goes a little something like this:

LTV = Average Revenue Per User (ARPU) x 1/Churn

This means it is relatively simple to work out the LTV of a general user in your app. If you know across your whole user base that Average Revenue Per Monthly User is $5 and that 40% of your users stop using your app after a month then you get the following LTV calculation:

$5 X 1/0.4 = $12.5

As a result of this, it can quite fundamentally change the way you look at your CPI strategy. Instead of worrying about bulk buying installs at as cheap a rate as possible, you could theoretically buy $2 installs from a provider in the future without losing money – so long as more than 20 percentof those users convert and go on to become $5 customers.

And better than that, if you can segment your users with the help of cohort analysis, then you can really start to get to the heart of how much a user is really worth. Knowing the exact value of a user who, say, purchases IAP regularly versus someone who comes in for a month, watches loads of ads and then churns, will help you craft a sensible long term acquisition strategy.

LTV > CPI

Now of course, LTV doesn’t come without problems.

The deeper you go into calculating cohorts, the more complicated it gets and the more infrastructure you need to do it effectively. If your churn increases or revenue decreases then you have to make sure your LTV number changes with it. And while the simple formula we used above is a starting point for forecasting the value of a user, it’s worth noting that the biggest companies hire applied mathematicians to ensure their forecasting model mitigates against change as much as possible.

But when compared to the volume-driven mind set of a CPI marketing approach, it is clear that LTV, for all its potential complexity, is the sensible long-term bet. Giving deeper insight into the value of a user from a marketing perspective and encouraging an approach driven in the pursuit of high-quality users, it fits perfectly into the maturing mind set of the mobile gaming market.

Shai Gottesdiener is General Manager of Perion Lightspeed, the leading provider of effective mobile advertising products.

Salesforce’s B2B marketing automation subsidiary Pardot almost tripled its customer acquisition rate last month, bringing in a massive 1,128 new customers while only losing 104.

Its competitor, Hubspot, gained almost as many customers — 1,051 on a base of about 12,000 — but also lost a staggering 740.

But all is not exactly what it seems.

Datanyze, the “Google for sales and marketing,” recently released more data from its constant web scraping, and that’s where these figures come from. The company searches sites for tags from known SaaS applications — like most marketing automation systems — to determine which vendors are growing, and which are shrinking. The most recent available data, from April, shows that Pardot, which had been bringing in 200-400 or so new customers each month for the past half-year, suddenly added 1,128 in a single month.

Other big gainers included InfusionSoft, with 561, and Marketo, with 518.

Above: Marketing automation share according to Datanyze. Note, this chart only shows data for the top 1 million sites on the internet.

Image Credit: Datanyze

That’s all very interesting data, no doubt about it, but you also have to account for the fact that many marketing automation systems are freely available for trial periods. So thousands of companies are always testing various vendors’ software , and dropping it when the trial runs out. That means that Datanyze is actually tracking users + trial users: still interesting, but not exactly the same as paying customers.

An example of this is Hubspot, which Datanyze’ full universe of data reports at 31,883 users, but which actually has somewhere north of 12,000 actual, paying, customers.

The more relevant data, perhaps, is who is actually gaining the most net new clients, according to Datanyze.

The biggest net gainers:

Pardot +1,024

Hubspot +311

Marketo +290

Act-On +181

DemandForce +90

Some companies, however, seem stuck in neutral. InfusionSoft, for example, showed impressive growth in gaining 561 new companies but also lost almost as many: 523. Not so impressive — until you consider that InfusionSoft targets companies with fewer than 25 employees, and their tiny sites probably haven’t registered on Datanyze scans of the web.

“Our target market is very small businesses,” InfusionSoft’s senior director of communications Rebecca Sprynczynatyk told me. “So when we look at the market share data it under-reports us by a factor of 10 — we have over 21,000 customers.”

Which means InfusionSoft’s churn is not nearly so bad as it might look at first glance.

Of greater concern, perhaps, might be Oracle’s Eloqua, which is aimed at enterprises that are certainly in the top million sites on the internet. Eloqua gained 336 new customers, but lost 328, according to Datanyze.

The data is important for companies that are considering purchasing marketing automation software, since it reveals crucial information about what happens when companies demo various companies’ wares … without the pain of having to try it yourself. Big net gainers are typically growing companies, with trials that successfully conclude with new customers.

it’s also important for investors, because in SaaS companies, customer churn is death. Losing customers every month means the company has to work hard selling new clients every month just to stay even, never mind grow, and even small percentages in monthly loss look enormous from an annual point of view.

Other interesting data:

Visitstat, a lead capture company, has lost more than 1,000 users each of the past two months

First, small business and mid-market solutions are always going to see more churn — both adds and drops — than enterprise solutions. It’s just the nature of the beast: There are more small companies, and they start and stop things faster than big corporations. Secondly, Datanyze data is pretty good, but it’s probably not infallible. While it spiders major companies daily, it’s likely that the numbers are not exact.

The big surprise in this data is Pardot.

Clearly the company has kicked sales and marketing into high gear in 2014, and clearly it’s working. It’s also impressive, since Pardot doesn’t (obviously) offer free trials, starts at a small-business-unfriendly $1,000/month, and targets mid-market to larger businesses. The company has a significant advantage, of course, in being part of Salesforce.com, which gives it access to Salesforce.com’s customer base in a way that few other marketing automation systems can duplicate.

The numbers have been so extreme that I asked Datanyze if there was a difference in their crawling or technology lately that could have caused this.

“In this case, no – more likely trials, etc,” the company’s marketing head, Jon Hearty, told me. “We’re still working out some bugs, but there haven’t been any major changes to our crawler recently that would affect these numbers significantly.”

In any case, Pardot has had an impressive couple of months of growth. Time will tell if it continues, or if the other marketing automation companies will counter its growth with increased marketing efforts of their own.

]]>0Pardot is the fastest-growing marketing automation system, beating Hubspot, Marketo, Act-OnGainsight uses data to help you keep your customers happyhttp://venturebeat.com/2013/11/06/gainsight-uses-data-to-help-you-keep-your-customers-happy/
http://venturebeat.com/2013/11/06/gainsight-uses-data-to-help-you-keep-your-customers-happy/#commentsWed, 06 Nov 2013 23:36:05 +0000http://venturebeat.com/?p=856690Customer retention is the difference between life and death for subscription businesses. Gainsight has closed $20 million in funding to help businesses keep their customers.
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Customer retention is the difference between life and death for subscription businesses.

A tremendous amount of time, energy, resources, and technology is funneled into customer acquisition, but businesses that run on recurring revenue have an equally strong need to retain their current customers.

Part of retention is simply have a good product and good customer service. If your product doesn’t suck, people are more likely to stick around. But that is not always the case.

Gainsight integrates with third-party applications to evaluate sales data, usage logs, support tickets, surveys and other sources of customer intelligence. It collects and analyzes this data to shine more light on churn rates.

The system will send early warnings about customers that are at risk of leaving so companies can swoop in and stop them. Gainsight also has tools for identifying happy customers and upsell opportunities.

As the oft-quoted Mark Andreessen famously said, “software is eating the world,” as is the software-as-a-service business model. Businesses of all sizes, but particularly smaller organizations, are increasingly drawn to cloud-based solutions that don’t have a high upfront cost and offer more flexibility.

There is SaaS out there for just about every business operation, from mobile app hosting all the way to expense reports. Gainsight pegs the subscription economy as worth $500 billion.

Furthermore there is a strong trend towards using data to drive business decisions. The cloud creates unprecedented opportunities to learn about customers, and reach out to them at critical moments.

Amidst these shifts, Gainsight saw an opportunity to build “Customer Success Management” tools that extend across multiple sectors of a business.

New features include “Customer360,” which presents comprehensive user profiles with information about usage, contracts, support activity, billing history, etc.. Gainsight also launched predictive analytics tools and an automated list of “to-dos” for customer retention.

Bain Capital Ventures led this round, with participation from existing investor Battery Ventures and new investor Summit Partners, which brings its total capital raised to $30 million.

Gainsight is based in Mountain View, California.

]]>0Gainsight uses data to help you keep your customers happyWith Playnomics, data science predicts which players will quit a game in the next monthhttp://venturebeat.com/2013/08/28/with-playnomics-data-science-predicts-which-players-will-quit-a-game-in-the-next-month/
http://venturebeat.com/2013/08/28/with-playnomics-data-science-predicts-which-players-will-quit-a-game-in-the-next-month/#commentsWed, 28 Aug 2013 13:00:57 +0000http://venturebeat.com/?p=803787Playnomics can tell developers who is quitting a game and how to stop that from happening.
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Playnomics claims it knows which players are likely to quit a game in the next 30 days and what a game developer can do to stop that from happening.

Playnomics says it’s advancing the science of running a profitable free-to-play mobile or social game. And it is moving the ball today with its Churn Predictor program on its PlayRM analytics platform. Just as data science has become useful in many other markets, it is becoming critical in games, and Playnomics’ goal is to give every game developer key insights into data and what they mean for the long term in regard to player behavior, audience targeting, promotions, and a game’s life cycle.

Chethan Ramachandran, the chief executive of Playnomics, said in an interview that 70 percent of players in free-to-play titles, where people can play for free and pay real money for virtual goods, will quit within the first 30 days. Playnomics can now predict how anonymized players will behave, who is likely to spend money, who should developers should target with promotions, and who the developer has to pay attention to in order to prevent the dreaded churn, or decision to stop playing a game.

The San Francisco company can do this because it sifts through data from its customers on more than 200 million player profiles in many of the leading online and mobile games. Playnomics is processing billions of in-game events per month. Founded in 2009, Playnomics (formerly Turiya) won our 2010 Who’s Got Game startup competition at our GamesBeat conference. (See here for this year’s contest). It has 30 employees and has raised $8.2 million to date from FirstMark Capital, Vanedge Capital, XSeed Capital, MetamorphicVentures, Accelerator Ventures, and TriplePoint Capital.

Over the years, Playnomics has rolled out more services that take advantage of the analytics that it collects on games for a platform it calls PlayRM. The Churn Predictor is the latest of several features that helps predict the lifetime value of a player in various game segments. Lifetime value is an important metric for game developers to figure out. If they collect a certain amount of money from a player over that user’s lifetime, the company has a much better handle on how much it should spend on marketing and advertising to acquire that user.

Some big companies can come by this type of information more easily by sifting through millions of users. But Playnomics hopes to help indie developers and mid-sized firms who can’t otherwise get access to huge amounts of user data. After studying its data, Playnomics is confident that it can figure out how long a person will play a certain game and what can be done to keep the user happy. Playnomics also shows the developer what kind of promotional campaign to create for that user. On the analytics dashboard, a Playnomics client can see how many days remain until a player will quit.

“This is a logical extension and something we have strived for all these years,” Ramachandran said. “It’s more important to predict when someone will leave in a free-to-play game, because your goal as a game developer is to keep the audience playing as long as possible. You see each player who is likely to leave the game. It’s powerful because it lets you focus on the campaign to run to stop that from happening.”

Above: Playnomics infographic

Image Credit: Playnomics

]]>0With Playnomics, data science predicts which players will quit a game in the next monthWhy the iPhone may finally stop T-Mobile’s subscriber bleedinghttp://venturebeat.com/2012/12/07/t-mobile-iphone-subscriber-bleeding/
http://venturebeat.com/2012/12/07/t-mobile-iphone-subscriber-bleeding/#commentsFri, 07 Dec 2012 19:27:39 +0000http://venturebeat.com/?p=586134By this point next year T-Mobile will have the iPhone, and, potentially, many more customers.
]]>Gaming execs:Join 180 select leaders from King, Glu, Rovio, Unity, Facebook, and more to plan your path to global domination in 2015. GamesBeat Summit is invite-only -- apply here. Ticket prices increase on March 6 Pacific!

For loyal T-Mobile customers, yesterday’s iPhone announcement was like an early Christmas present. T-Mobile is finally playing with the big boys — and making a lot of people happy in the process.

But as good as the news is for subscribers, this is much more significant for T-Mobile itself. The carrier has shed over a million customers over the past three quarters, a distressing turnout by anyone’s count. Will the iPhone be key to turning T-Mobile around? IDC analyst Ramon Llamas has no doubt that it will.

“The iPhone is definitely going to help stop T-Mobile’s bleeding and exodus of subscribers,” he said by phone today.

The iPhone has had a tremendous effect on mobile subscriber rates, which carriers call “churn.” This is true not only in the U.S. but just about everywhere else on Earth as well. Consider Japan’s iPhone-less NTT Docomo, which reported today that it lost 40,000 subscribers last quarter. iPhone-touting rivals Softbank and KDDI, on the other hand, saw their own subscriber rates increase by 301,900 and 228,800, respectively.

The message is clear: Give your customers the iPhone or watch them flock elsewhere.

T-Mobile’s renewed efforts are larger than just the iPhone, however. As CEO John Legere said Thursday, T-Mobile is embarking on a major effort to unseat the entire way we buy phones. This means the end of the smartphone subsidy, which has been carriers’ preferred way to sell phones. While this business model has been a major reason for the smartphone’s meteoric rise, T-Mobile says that it’s expensive, outdated, and a trap for consumers.

As T-Mobile promised yesterday, it’s also moving toward becoming what Legere calls “the un-carrier.” “Part of the strategy is to be different, to be bold — and I think we’re going to attack a few age-old areas in 2013. It’s going to be quite fun,” he said yesterday.

While it’s an interesting sentiment, Llamas doesn’t buy it. “At the start of the day and at the end of the day, T-Mobile is still a carrier. They’ve just acknowledged their challenger position,” he said.

That position, however, isn’t as dire as it may seem. “They still make good business, and I think they are still a very viable option for many people,” Ilamas said.